Canada adds 39,800 jobs in May, unemployment rate drops to record 5.1%

By Paul Vieira

OTTAWA – The Canadian economy added jobs in May at a faster pace than expected, while the unemployment rate edged down to a new record low. Average hourly wages also accelerated to their fastest pace in 15 months.

Statistics Canada reported Friday that employment in Canada rose by a net 39,800 in May, ahead of market expectations for a gain of 25,000, according to economists at TD Securities. All net new jobs were full-time, up 135,400, and mostly in the public sector, which added more than 108,000 employees during the month. Both part-time and private sector employment fell in May.

Canada’s unemployment rate in May also fell to a record low of 5.1%, from 5.2% the previous month. According to market expectations, the unemployment rate remained unchanged in May. A year ago, the unemployment rate in Canada was 8.0%.

Calculated using US Department of Labor methodology, Canada’s unemployment rate in May was 4.1%. The United States last week reported an unemployment rate of 3.6% for the month of May.

Average hourly wages in May posted their largest year-over-year increase since February 2021, rising 3.9%, compared with an annual gain of 3.3% the previous month. May’s wage gain remains below annual inflation, which in April rose nearly 7%. The data agency added that wages for permanent employees jumped 4.5% on an annual basis. Hours worked fell slightly in May, by 0.3%, from the previous month, but rose 5.1% from a year ago.

The jobs data likely reinforces the Bank of Canada’s current narrative that there is excess demand in the economy and higher interest rates are needed to properly align demand with supply and bring back the economy. inflation closer to its preferred target of 2%. At a news conference on Thursday, Bank of Canada Governor Tiff Macklem said the Canadian economy was strong, citing labor market data indicating there are currently about twice as many vacancies – nearly a million – compared to pre-pandemic levels.

“We need to curb labor demand and remove these vacancies, but not put people out of work. That said, it will be a delicate task. [process]Macklem said. Macklem said the bank may need to consider more rate hikes than previously expected, or rate hikes greater than half a percentage point, to hit its target. Last week , the central bank raised its key rate to 1.5% and signaled that it may need to reach 3% or more.

“Our hope is that we can avoid the need for a steeper slowdown to bring inflation back to target,” he said.

Write to Paul Vieira at paul.vieira@wsj.com
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